Pages

Monday, June 21, 2010

New week, new record: Gold makes new highs for third straight day

Gold rose to a record in London and New York as other commodities gained on speculation demand for raw materials will increase and as investors bought the metal to protect wealth from Europe’s financial turbulence.

China, the world’s third-largest economy, said it may allow the yuan to move higher, making commodities priced in other currencies less expensive for Chinese consumers. Bullion gained in eight of the past nine weeks on speculation debt-cutting measures by European nations will slow expansions. Other precious metals rose to the highest levels in at least a month.

“Gold is benefiting from other commodities,” said Jesper Dannesboe, a senior commodity strategist at Societe Generale SA in London. The China news “is a catalyst, a trigger for buying today. People are still worried about sovereign debt levels.”

Gold, up 15 percent this year, is heading for its 10th consecutive annual gain, the longest winning streak since at least 1920. Bullion has outperformed other commodities as global equities slipped, and this month reached all-time highs in euros, sterling and Swiss francs. Holdings in exchange-traded funds backed by gold reached records, while coin sales from mints accelerated, tightening supplies.

Gold for immediate delivery added as much as $8.50, or 0.7 percent, to $1,265.30 an ounce and traded at $1,260 at 11:41 a.m. in London. It surpassed the previous all-time high of $1,262.50 set June 18. The metal for August delivery was 0.2 percent higher at $1,261.10 on the Comex in New York after reaching $1,266.50.

The metal rose to $1,259.50 an ounce in the morning “fixing” in London, used by some mining companies to sell output, from $1,256 at the afternoon fixing on June 18.

Stronger Yuan

A stronger yuan will help curb inflation in the world’s third-largest economy and shift investment toward service industries from export-manufacturing, the People’s Bank of China said yesterday. Chinese authorities had prevented the currency from strengthening against the dollar since July 2008 to help exporters cope with the global financial crisis.

“The impact on China in the short term will be neutral for gold prices,” Wallace Ng, executive director with Fortis Nederland NV in Hong Kong, said in an interview with Bloomberg Television. A stronger yuan will benefit gold prices in the longer term because it will increase the purchasing power of Chinese investors, he said.

The dollar was little changed against the euro today, rebounding from a loss of as much as 0.8 percent. All six main industrial metals on the London Metal Exchange rose and crude oil futures climbed in New York.

Russia Buying

The MSCI World Index of equities is down 3.8 percent this year, and raw materials as measured by the Reuters-Jefferies CRB Index have slid 7.2 percent. Returns on benchmark U.S. Treasuries have gained 4.5 percent this year.

Russia’s central bank bought 26.6 metric tons of gold in the past quarter, taking holdings to 668.6 tons, and the Philippines increased holdings by 9.5 tons in March to 164.7 tons, the World Gold Council said on June 18. The Saudi Arabian Monetary Authority reported last quarter that it “modified from first quarter 2008” its holdings to 322.9 tons, from 143 tons after adjusting accounts, the council said.

“This creates speculation that Asian and Middle Eastern central banks want to own more gold,” Societe Generale’s Dannesboe said. “It just adds to the bullish story.”

Bullion has advanced in 2010 even as the dollar, which usually moves inversely to gold, has strengthened as the euro slumped on concern about sovereign finances in Europe. The single European currency has dropped 13 percent against the dollar this year.

‘Strong Interest’

Gold reached a record 1,051.27 euros an ounce, 870.65 British pounds and 1,451.16 Swiss francs on June 8, Bloomberg data show.

“It is clear that there is extremely strong interest in gold,” said Gavin Wendt, senior resource analyst with MineLife Pty Ltd. in Sydney. “This is all a direct consequence of investors seeing gold as a more attractive investment class, and this trend will only continue to grow.”

Assets in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, were unchanged at a record 1,307.96 tons on June 18, according to the company’s website. Global holdings of the metal by ETFs increased 0.2 ton to an all-time high 2,044.87 tons on June 18, according to Bloomberg data tracking 10 providers.

Silver for immediate delivery in London climbed as much as 1.5 percent to a five-week high of $19.4575 an ounce and last traded at $19.3575. Platinum gained 0.7 percent to $1,599.30 an ounce, the highest price in a month, and palladium was up 2 percent at $500 an ounce.

No comments:

THE MONEY MARKET

FRIENDS